Inflation

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  • Inflation
    • What causes inflation?
      • Cost-push inflation
        • Caused by rising costs
      • Money supply inflation
        • Caused by rapid growth in the money supply
    • 2 Ways it is measured
      • Consumer price index (CPI)
        • A measure of the general price level (excluding housing costs); used in the UK and Eurozone.
        • Used by the UK
        • Every month  600 goods are being measured for 7,000 families
          • Retail Price index (RPI)
            • A measure of the general price level which includes house prices and council tax
          • This creates and average price which is turned into an index number
      • Retail Price index (RPI)
        • A measure of the general price level which includes house prices and council tax
    • Demand-pull inflation
      • Inflation caused by too much demand in the economy relative to supply.
      • How is it caused?
        • Rising consumer spending fuelled by tax cuts or low interest rates.
        • Sharp increases in government spending.
        • Rising demand for resources by firms
        • Booming demand for exports
    • How does inflation affect economy
      • Reduces purchasing power
      • Reduces the value of savings
      • How does inflation affect buissness?
        • Increased buisness costs
        • Balance of payments problems
        • Increases in government spending.
    • How does inflation affect buissness?
      • Increased buisness costs
      • Balance of payments problems
      • Increases in government spending.

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